Breeda Moynihan-Cronin
Ceist:80 Mrs. B. Moynihan-Cronin asked the Minister for Finance his views on continued implementation of the TWIG report; and if he will make a statement on the matter. [19504/98]
Written Answers. - Tax and Social Welfare Code.
The report of the expert group on integrating the tax and social welfare systems, commonly referred to as the TWIG report, was published in 1996. The group's terms of reference covered policy on both taxation and social welfare. The recommendations relating to social welfare measures are primarily a matter for my colleague, the Minister for Social, Community and Family Affairs. The report contained three principal recommendations in relation to tax policy: the gradual elimination of the general income tax exemption limits thereby eliminating marginal relief; the gradual phasing out of the employment and training and health levies over time as resources permit which was started by converting the threshold into an allowance; and the improved co-ordination of tax and social welfare reforms.
The exemption limit-marginal relief system was identified by the group as a contributory factor in unemployment and poverty traps. The first of these recommendations is therefore being implemented in the manner recommended by the TWIG, by increasing personal allowances by more than the increase in the exemption limits, and I expect to continue this approach, as resources permit. The numbers on marginal relief have fallen from over 16 per cent of the taxpaying population to under 7 per cent arising from measures introduced in the two previous budgets.
The second recommendation concerning the levies has been addressed by increasing the threshold for the payment of the levies. However, phasing out of the levies would be costly, and it would not benefit anyone with earnings below the threshold, currently £10,750 per year, though it would be of considerable benefit to those above this threshold. This recommendation will be borne in mind in the context of the preparation of future budgets.
On the third recommendation, the analysis undertaken by the expert group pointed to the benefits which could be obtained from a more co-ordinated approach to reforms of the tax and social welfare systems, and the need to study this interaction has been taken on board in the formulation of tax and social welfare packages in recent budgets.
The contents of the TWIG report will continue to be taken into account in the formulation of proposals for further changes in the income tax system.